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NEWPORT BEACH, CA. – Colleges and universities could do much more to lower their costs, argues a leading expert on the business methods of these institutions.

The Topic: College budgets

Why It Matters: If colleges curtail costs, they and potential students could benefit

If they did, they might attract more students and establish more secure foundations for the future, said Richard Staisloff, whose consulting firm advises colleges and universities about financial matters.

Increasing slightly the number of students per class, combining academic programs, and measuring the return on investment of each department at colleges and universities were some of the ideas proposed by Staisloff, founder of rpkGROUP, at a conference on higher education finances Thursday, hosted by the University of Southern California’s Rossier School of Education.

Staisloff told the roomful of academic leaders that places of higher learning rarely break down their costs in program-specific ways that could lead to money-saving measures. Examining their budgets in more fine-tuned ways, he said, could yield some surprises about which programs or institutions make the most of the money they have.

Schools “want to have a healthy business model, otherwise [they] can’t do the things [they] want to do,” Staisloff said, which is to educate and graduate more students.

“The best way to reduce cost is not to cut costs, but to reduce incompletion,” he added, referring to students who don’t graduate.

For every $100,000 that two-year colleges spend, three students complete their programs; for four-year public colleges, the number is 1.75 and for nonprofit private colleges it is one.

To that end, schools should forecast the fiduciary outlook of each program they offer, and should use a common set of metrics for all of them, he said. The upshot shouldn’t be to shutter programs with fewer students. Instead, Staisloff argued, deans within each college or university should meet to exchange ideas on reducing costs and on how to do more with less, without hurting student achievement. That could mean combining academic departments; expanding a popular program, like nursing, or relying on more part-time staffers to teach certain courses.

For example, in one college analysis, Staisloff said he surprised deans in finding that religious studies, not business or law, was the program that produced the most income after factoring in expenses.

Studies show mixed results on whether adjuncts, who are typically lower-paid instructors, produce the same academic results in lower-level courses as tenured scholars, who collect far larger salaries.

At the University of Central Missouri, an effort to pare spending led to a decrease in the number of academic departments from 33 to 25, saving the university more than $600,00 annually, according to a case study Staisloff wrote in 2013.

“The best way to reduce cost is not to cut costs, but to reduce incompletion.”

One key measure of a school’s financial efficiency, Staisloff said, is the rate of student degree completions for every $100,000 spent. In an analysis of federal data using the Integrated Postsecondary Education Data System, known as IPEDS, Staisloff looked at virtually all colleges and universities from 2003 to 2013, and found that two-year public colleges produced more degree completions for the same amount of money than four-year public and private schools.

For every $100,000 that two-year schools spend, three students complete their programs, and that financial efficiency has been rising over time. At four-year public colleges and universities, the number is 1.75 completions for $100,000 spent, while at nonprofit private schools, it is one completion for every $100,000 spent.

Staisloff also believes that the more money an institution receives, the more it will spend, a contentious view among higher-education finance scholars.

Whatever the reforms, the recent recession jostled the finances of many colleges and universities in the United States. In December, 2015, Moody’s released an analysis of the economic health of colleges that found that 20 to 30 percent of the schools rated would have difficulty maintaining their financial health in the next 12 to 18 months.

This story has been corrected; an earlier version gave incorrect figures for the number of students completing degree programs per $100,000 spent by various colleges or universities.

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